Wheat finds support in a quiet market
The wheat complex was little changed this week, trading in a narrow range but with plenty of volatility to keep it interesting. After a swift move lower last week down to near trading range lows, this week the market just traded in a sideways pattern as it was unable to maintain the downward momentum but also couldn't sustain a rally.
One can't blame the bulls for staying on the sidelines; soaking rains across virtually the entire hard red wheat belt of the southern and central Plains and excellent moisture in soft red country with warm temps on the way aren't reasons to get long a market that is quickly moving into the key growth stages.
Frost damage estimates continue to roll in, and losses continue to mount. Oklahoma appears to be the hardest hit, with Texas close behind. However, many of the frost regions were already stressed by drought so some yield losses were already factored in. It's the losses in Kansas, though, that is holding the market's attention, and damage reports from there could be enough to hold the market for now. It is important to note, however, that weather has been excellent for recovery and now it's a wait and see exercise.
You could take your pick of bearish news this week. The soaking rains, the US importing 160,000 MT of feed wheat from Denmark, Egypt buying from Russia and France, another mediocre week of export sales at only 311,000 MT, good weather across most of the Northern Hemisphere, good weather in Australia as they prepare for planting, and even the corn market sliding significantly lower. And yet, wheat prices held their own in an impressive stand at support levels.
It was clear this week that wheat simply was not ready to break down. Those several bearish factors filtering into the market throughout the week and yet prices just held tight. It appears that the market wants to get a better handle on the frost damage; it's increasingly nervous about North Dakota's spring planting season; and has been the beneficiary of some serious spreading (or spread unwinding) with corn.
The seasonal tendency for wheat during April is to be just what it has been - choppy. But, as we get into the month of May the seasonal becomes more defined. Typically, as we get into the first week of May wheat has a strong tendency to peak and start moving lower, especially if growing conditions have been good - which appears likely to be the case this year. Unless the longer term forecasts hold some concerns, prices usually work their way lower into the harvest lows of mid-June/early July. As always, it will be Mother Nature that calls the shots.
I would expect wheat to follow the seasonal pattern, suggesting support at the trading range lows of the last couple of months and resistance at the highs of just last week. That said, it appears to me that we're spending an awful lot of time at the lows, suggesting there is an inability of the market to find serious buyers. If the market begins to break down from here, then the downward pressure will have a lot of momentum behind it, particularly if the other grains break as well and/or if the financial market begins to unravel again.